Thursday, June 30, 2016

Baby Boomers Impact On Business & The US

78 million Baby Boomers are turning 65 at the rate of 10,000 a day for next 18 - 20 years. Presumably, this huge demographic will begin collecting Social Security and Medicare, assuming they remain solvent, transferring about $46 Trillion of wealth from the federal government to these recipients. In essence, instead of paying taxes into the system, most of them will begin taking their money out. Of course, both Social Security and Medicare are headed toward insolvency unless Congress and the President, whoever he or she may be does something to modify these programs, one way or another.

In any case, since this group is the largest single demographic in American history, their retirement will have a huge impact on global business and the US in general. There is a good likelihood that half or more of these Baby Boomers are financially ill prepared to retire because they did little to save for retirement during their working years. These people will have little disposable income depending on government and relatives, if they are lucky enough to have any with money, for their sustenance. They probably will be living in smaller rental units because in many cases, they never paid off a home. The smarter half, if it is half, may have the money to live happily ever after so to speak, assuming they are not supporting their kids in one way or another and or that government does not attempt to confiscate their assets to support those with nothing.

It is the Baby Boomer half with money that will help shape the global economy in terms of their buying habits. If they were smart they paid off their homes; but not all of them did so. Some are still paying off mortgages, which will take a lot of their disposable income. If their homes are paid off, they will spend money on experiences; travel, eating out, golf and other recreational activities, spending time with family out etc. However, their need for new cars, new homes, new furniture, new clothing etc will be limited.

By the time these Baby Boomers are 75, they will start to utilize home care and eventually assisted living services converting their home equity and other invested monies into the services they need to continue living life. If they did not do so already, they will downsize their homes one way or another either moving to smaller houses and or moving into assisted living facilities. There will also be a shift from many high cost cities to lower cost second tier smaller cities. The Home Care and Assisted Living industries, built to deal with the World War II Generation, is already a Multi-Billion industry and it has not even started. After a ten year lull, these industries will boom beginning in 2025 as Baby Boomers have need of these services.

It is clear that 78 million Baby Boomers will have a significant impact on business and the US in retirement; but in very different ways than when they were working. Happy Hour may start a lot earlier than 4 pm. Cars that can drive themselves will be in demand; but instead of owning two, or three cars, there will one in a household. The need for living space will be diminished as services will become much more important. Businesses that adapt to this demographic will do very well. Those that do nothing to adapt will see their revenues shrink.